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The US shipping regulator has accelerated a clampdown on the sector as it seeks to fulfil a pledge from Washington to target “foreign-owned carriers” that clashed with American importers during recent supply chain disruptions.
The Federal Maritime Commission, which is small compared with other US regulatory bodies but is growing, imposed penalties and reached settlements totalling almost $3mn in the 12 months to September, up from barely $100 three years earlier.
The FMC, which investigates excessive charges and contract breaches by shipowners, resolved 36 cases during the year to September, almost triple the number of two years earlier, according to data shared with the Financial Times.
It has come under pressure following a surge in shipping complaints during the Covid-19 pandemic, officials said.
But its move to hand down more penalties reflects a tougher approach globally to the shipping industry. The sector has historically proved difficult to regulate because of its international nature but has faced fresh scrutiny following a disruptive period for trade.
“Activity has tremendously increased,” said Daniel Maffei, a former congressman and now chair of the independent FMC, which is based in Washington. He said the regulator was previously criticised for not being “potent”, but “that is clearly very different now”.
After bottlenecks at ports during the pandemic led to severe delays and increases in the cost of shipping — drawing attention to traders’ dependence on a handful of powerful shipowners — Congress passed legislation to broaden the FMC’s remit last year.
Announcing the passing of the Ocean Shipping Reform Act, President Joe Biden drew attention to the “nine foreign-owned” businesses that dominate shipping and promised to “crack down on ocean carriers whose price hikes have hurt American families”.
More than 80 per cent of the world’s container shipping capacity is controlled by nine companies, including China’s Cosco and Switzerland’s Mediterranean Shipping Company, according to data provider Alphaliner.
The FMC has since opened a fast-track route for businesses to report illegal charges by email. In the 14 months since July last year, companies have submitted 394 such complaints, the regulator said.
But the number of cases far exceeds the regulator’s staff capacity. Maffei said employee numbers have risen from 110 to about 135, with an eventual target of 160. The FMC has completed 43 investigations into reports of erroneous charges, while 101 cases have been resolved by the shipping companies involved.
“There are always limits to what one can do. It’s a small agency,” said Maffei, adding he would like to “go after more cases, more quickly”.
“This is a tough job market to find professionals with [the right] qualifications who are willing to work for government and not make the big bucks,” he added.
Maffei added, however, that the FMC now had enough resources “to take on the big guys” and was focusing on closing cases that create a “deterrence”.
The $2.89mn of civil penalties imposed this year largely consist of two fines totalling $2.65mn. These were paid to the US government by Ocean Network Express and Wan Hai, two of the largest container carriers, in settlements over allegations of unreasonable charging practices in areas such as fees levied for the return of empty containers.
Policymakers in Europe have also tightened scrutiny of shipowners, with the EU deciding this month to axe the shipping industry’s exemption from its antitrust laws. The bloc’s competition chief said “significant structural changes”, including industry consolidation, had changed the market.
But the shipping industry has strongly resisted the crackdown. Following the passage of the Ocean Shipping Reform Act last year, the World Shipping Council said it was “appalled by the [US government’s] continued mischaracterisation of the industry”.
Higher shipping costs were a result of “demand outstripping supply” during pandemic-related disruptions, rather than price gouging, it added.
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